[Asia Exclusive] Bae Jae-hoon, HMM CEO: "Ultra-large Ships, Weapons to Overcome 'COVID-19'"

"Q1 Performed Decently... Not Optimistic but Must Overcome the Situation"

Haejun Baejae, CEO of HMM, is being interviewed by Asia Economy on the 27th. / Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Yoo Je-hoon] "There are concerns among the public about whether the newly introduced ultra-large vessels can be fully loaded, especially amid the COVID-19 pandemic. However, it would have been even more difficult with the existing high-cost vessels. The ultra-large vessels have actually become a weapon to overcome this situation."

On the 8th, the voice of Bae Jae-hoon, CEO of HMM (formerly Hyundai Merchant Marine), carried an unexpected calmness. This was amid an unprecedented economic crisis caused by COVID-19, which has triggered red flags for business normalization.

He pointed to joining THE Alliance, one of the world's top three shipping alliances, as the ultimate weapon to overcome COVID-19, along with the sequential introduction of twelve 24,000 TEU-class ultra-large vessels starting with the first ship, HMM Algeciras, last month. Through the shipping alliance, stable cargo volume can be secured, and the new vessels with a low-cost, high-efficiency structure can provide a foundation for business normalization.

- On the 28th of last month, the naming ceremony for the first 24,000 TEU-class vessel, Algeciras, was held. President Moon Jae-in and First Lady Kim Jung-sook attended. Did President Moon give any special requests?

▲ He urged for a "swift business normalization." The five-year plan for shipping reconstruction was established under this administration, and accordingly, the Korea Ocean Business Corporation was established to support shipping reconstruction. The launch of this 24,000 TEU-class vessel is the first tangible result of that effort. The order was to quickly normalize the company and lead the shipping reconstruction.

- Since the beginning of the year, the impact of COVID-19 has spread in the shipping market. How was the situation in the first quarter?

▲ It was very difficult as cargo volume from China dropped by about 40%, but we responded well at each moment and managed to hold up. To do this, we operated an emergency situation room, checking daily oil prices, freight rates, and exchange rates. We also installed a monitoring system in the office and convene meetings immediately when issues arise. (During the visit that day, a large monitor was installed in CEO Bae’s office, updating real-time cargo and various shipping-related indicators.)

- There are growing concerns that the future will be more problematic due to COVID-19. Recently, the Korea Maritime Institute (KMI) forecasted that global container ship cargo volume will decrease by about 12% this year, and the outlook is not optimistic.

▲ It is true that the future market outlook is not optimistic. Major countries like the U.S. and Europe are all in shutdown, so normal business operations are impossible. Accordingly, container cargo volume is expected to decrease. At present, it is difficult to predict whether there will be a V-shaped or U-shaped recovery after the second quarter.

- At the beginning of the year, you expected to return to profitability in the third quarter. What is the current situation?

▲ It is more a situation where we have to break through than being optimistic. Fortunately, since the second quarter, shipping alliances have been adjusting supply through vessel idling (temporarily suspending vessel operations to reduce capacity). In the past, global shipping companies maintained or expanded capacity even during downturns to strengthen monopolies, but now even global carriers try to avoid such extreme situations. Adjusting capacity to maintain freight rates is better than engaging in endless competition.

- There are also concerns about whether sufficient cargo can be secured amid the sharp decline in cargo volume.

▲ The newly introduced 24,000 TEU-class vessel has unmatched price competitiveness and eco-friendliness at this moment. Without this vessel, joining the shipping alliance would have been difficult. In some ways, we could have been pushed into a more desperate situation. Especially in THE Alliance system, the four member companies (HMM, Germany’s Hapag-Lloyd, Japan’s ONE, and Taiwan’s Yang Ming Marine Transport) share vessel capacity, which reduces the burden accordingly.

- Over the past year, you actively recruited and placed former Hanjin Shipping employees. What are the results?

▲ I always think of "On-go-ji-shin" (learning from the old to understand the new). While leveraging the strengths of the former Hyundai Merchant Marine, we also need to adopt the strengths of Hanjin Shipping. Currently, out of about 1,200 employees, around 200 are former Hanjin Shipping employees, and Park Jin-ki, the vice president overseeing the container business division, is also from Hanjin Shipping. Despite strained Korea-Japan relations last year, we successfully joined THE Alliance by utilizing the network of former Hanjin Shipping employees like Vice President Park with the Japanese shipping company ONE. The fact that we managed well despite falling freight rates last year is likely due to this background.

- Your reflections on your first year in office and future goals?

▲ Despite running frantically, I believe we have come this far without major issues thanks to the cooperation of executives and employees. Everyone is facing difficulties, and we are no different, but even in this crisis, our (HMM’s) cost structure has greatly improved. Although it is hard to guarantee the timing, I hope to achieve swift business normalization beyond the COVID-19 crisis. We plan to diversify our business portfolio. Recently, we have been developing the next-generation shipping logistics system, "New GAUSS 2020," as part of this effort. In addition, we are considering expanding businesses related to energy transition equipment and increasing the proportion of dry bulk carriers.

This content was produced with the assistance of AI translation services.